The average age of a firm's depreciable assets is 9 years. The firm, subject to a tax rate of 40%, saves 20,000 each year due to depreciation expense. The total depreciation that the firm has accumulated is _______.
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A. B. C. D.C
Since tax savings from depreciation = (depreciation expense)*tax rate, one obtains depreciation expense = 20,000/0.4 = 50,000. Also, Average age =
Accumulated depreciation/Depreciation expense. Hence, total accumulated depreciation = 9*50,000 = 450,000